Hedge Fund Job Interview Questions

In the course of a 30-minute hedge fund job interview, you may only get a chance to answer a dozen questions. But developing a larger list of potential questions in advance, and practicing your responses, will make your answers seem that much more clear, natural and convincing. And there won’t be any discussion of pay at this time.

Naturally you need to prepare answers to the basic questions about yourself, and be able to quickly introduce yourself, what you’re doing now, and walk the interviewer through the highlights on your resume. You’ll also need to answer questions such as:

-Why do you want to work in hedge funds?
-Why do you want to work for our firm in particular?
-What would you say are our firm’s strengths and weaknesses?
-What skills do you bring to our firm?
-Why do you think you’ll be successful as a hedge fund manager?

Anyone involved in hedge funds will likely have a passion or deep interest in investing and the markets. So you can expect a bunch of questions that explore your interest level and opinions, such as:

-What do you invest in?
-Do you own any stocks or do any non-work-related investing?
-What do you think of the markets in general right now?
-If you could invest in anything, anywhere in the world right now, what would that be?

You should have a thorough understanding of hedge fund investing strategies and terminology, so that you can answer technical questions such as “What is convertible arbitrage?” or “What is global macro?” Or “what is short selling?” You may also be quizzed on technical aspects of the industry, such as what is a prime broker? What role does it play? What is a 10-K report?

You may be asked a brain teaser or mathematical question in the course of the interview, to see how you respond. One classic example is known as The King’s Conundrum.

A king demands a tax of 1,000 gold sovereigns from each of 10 regions of his nation. The tax collectors for each region bring him the requested bag of gold coins at year end. An informant tells the king that one tax collector is cheating and giving coins that are consistently 10% lighter than they should be, but he does not know which collector is cheating. The king knows that each coin should weigh exactly one ounce. How can the king identify the cheat by using a weighing device exactly once?

Answer: The king should take one coin from bag one, two coins from bag two, three coins from bag three, and so on, finishing with ten coins from bag ten. Place this collection on the weighing device, and look for the discrepancy from 1+2+3+…+10 ounces. If the actual weight is .40 ounces short, for example then bag four is light, and collector four is the cheat.

(Special thanks for this interview question to Timothy Crack, author of Heard on the Street: Quantitative Questions from Wall Street Job Interviews.)

Next time, we’ll look at some other hedge fund job interview questions, especially if you’re looking for a job as a trader. Along with the best way to finish a job interview.